Federal Trade Secrets Act is now the law!

On May 11, President Obama signed into law the Defend Trade Secrets Act (“DTSA”) after Congress passed it on April 27, 2016 (Available Here), 18 U.S.C. sec.  1836.  The DTSA is intended to coexist with, and not to pre-empt, influence, or modify applicable state law. The bill is expected to be signed into law by the President.  Most importantly, the DTSA will provide a federal cause of action for theft of trade secrets.  

The DTSA provides business owners with powerful new tools to protect their intellectual property.  Under the DTSA, in extraordinary circumstances, plaintiffs may seek to have law enforcement seize the subject property to prevent dissemination of the trade secret.  The DTSA also provides defendants with a process for challenging an improper seizure of property, employment protections and recovery of attorneys’ fees for actions brought in bad faith.

Enactment of DTSA and enforcement in federal court should lead to a more consistent body of law in connection to what is protected as a “trade secret,” what is actionable and the available remedies. The available damages under the DTSA include damages for actual loss, unjust enrichment, or a reasonably royalty for the unauthorized disclosure or use of the trade secret.  Federal Courts may award double damages and reasonable attorneys’ fees for willful and malicious misappropriation.  Reasonable attorneys’ fees may be awarded, if a claim of misappropriation is made in bad faith, which may be established by circumstantial evidence, or a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated.

The DTSA also provides for immunity for an individual or whistleblower that discloses a trade secret in confidence to the government to investigate potentially illegal activity.  An individual is also immune from liability for limited disclosure of the trade secret when an employee files a retaliation claim based upon reporting a violation against an employer.  The employer must include a notice regarding the immunity in any contract or agreement with an employee that covers the use of trade secrets and other confidential information.  Failure to provide the notice, could cost the employer the ability to recover double damages and attorneys’ fees against the employee, if available.